Distribution

In the 21st century, consumers spend less money on recorded music than they have in 1990s, in all formats.

The decline of CD's

Total revenues for CDs, vinyl, cassettes and digital downloads in the world dropped 25% from $38.6 billion in 1999 to $27.5 billion in 2008. Same revenues in the U.S. dropped from a high of $14.6 billion in 1999 to $10.4 billion in 2008. The Economist and The New York Times report that the downward trend is expected to continue for the foreseeable future.
Forrester Research predicts that by 2013, revenues in USA may reach as low as $9.2 billion. This dramatic decline in revenue has caused large-scale layoffs inside the industry, driven retailers (such as Tower Records) out of business and forced record companies, record producers, studios, recording engineers and musicians to seek new business models.

Illegal File Sharing

People can easily download music illegal through file sharing software such as Limewire. In the early years of the decade, the record industry took aggressive action against illegal file sharing. In 2001 it succeeded in shutting down Napster (the leading on-line source of digital music), and it has threatened thousands of individuals with legal action. This failed to slow the decline in revenue and proved a public-relations disaster. However, some academic studies have suggested that downloads did not cause the decline.

Legal digital downloads became widely available with the debut of the iTunes Store in 2003. The popularity of internet music distribution has increased and in 2009 more than a quarter of all recorded music industry revenues worldwide are now coming from digital channels.
However, as The Economist reports, "paid digital downloads grew rapidly, but did not begin to make up for the loss of revenue from CDs." The 2008 British Music Rights survey showed that 80% of people in Britain wanted a legal P2P service, however only half of the respondents thought that the music's creators should be paid. The survey was consistent with the results of earlier research conducted in the United States, upon which the Open Music Model was based.

The turmoil in the recorded music industry changed the twentieth-century balance between artists, record companies, promoters, retail music-stores and the consumer. As of 2010, big-box stores such as Wal-Mart and Best Buy retail more music than music-only stores, which have ceased to function as a player in the industry.

Live Performance & Merchandise

Recording artists now rely on live performance and merchandise for the majority of their income, which in turn has made them more dependent on music promoters like Live Nation (which dominates tour promotion and owns a large number of music venues.) In order to benefit from all of an artist's income streams, record companies increasingly rely on the "360 deal", a new business-relationship pioneered by Robbie Williams and EMI in 2007. At the other extreme, record companies can offer a simple manufacturing and distribution deal, which gives a higher percentage to the artist, but does not cover the expense of marketing and promotion. Many newer artists no longer see any kind of "record deal" as an integral part of their business plan at all.

Self-Distribution
Inexpensive recording hardware and software made it possible to record reasonable quality music in a bedroom and distribute it over the internet to a worldwide audience. This, in turn, caused problems for recording studios, record producers and audio engineers: the Los Angeles Times reports that as many as half of the recording facilities in that city have failed.
Changes in the music industry have given consumers access to a wider variety of music than ever before, at a price that gradually approaches zero. However, consumer spending on music-related software and hardware increased dramatically over the last decade, providing a valuable new income-stream for technology companies such as Apple Inc.